Building Trust from Code: Disclosure Commitments on Blockchains

SYNOPSIS I investigate firms’ decisions to make disclosure commitments before realizations of signals in the initial coin offering (ICO) market. Blockchain technology allows entrepreneurs to make irreversible decisions to disclose their transactions with investors before the transactions take place. Such decisions are coded into computer programs known as “smart contracts.” I manually collect the smart contract code of 2,085 ICO projects and find significant variations in disclosure practices. I find that ICOs that commit to a higher level of blockchain disclosures are associated with greater fundraising success and a higher likelihood of delivering project outcomes. These findings are consistent with blockchain functioning as a self-commitment device, allowing entrepreneurs to convey credible signals in the unregulated market. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M13; M41.